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Alert on Incorrect CSA treatment of Transition to Retirement pensions

I am new to this forum but feel it is my duty to warn any members who participate in a Transition to Retirement arrangement through salary sacrifice.  I recently received my assessment based on my 2009/10 tax return and my first assessment under the new rules about salary sacrificing to super.  I have no problems with the concept of adding the salary sacrificed amount back into your taxable income as long as it was done fairly.  My taxable income included my group certificate amount and also an amount which was the Taxed element of the pension I drew from my super to balance the salary sacrificed amount that I put in.  This amount appears on the Tax Form as Income 7 box J.

What CSA have done is double dip.  They take the taxable income which includes an amount for the taxable element of the pension (in my case $6900) and added to it the full salary sacrificed amount.  It doesn't take much figuring to see that they are over-reporting your income because that are adding the Salary sacrifice and then adding in the taxable component of that because the Taxable income figure they get from ATO includes this taxable element.

Transition to retirement arrangements are a legitimate and legal scheme used by many older Australians and now the CSA through ignorance (I'd prefer to believe that this was a result of policy makers not having a clue rather than an deliberate attempt to rip off CSA payers) has made the CSA payers once again a cash cow.

Well spotted! but not applicable to CSA payers

What great news! NOT.. I've been salary sacrificing too, yet I'm the payee.  Thanks for the heads up I am going to check my assessment to see if they've done that to me too. Thanks!
Mike C,

It seems on face value given the change in the Social security laws in 2009 may have made this retirement strategy less effective for pre-retiree's. Do you have a financial adviser? I would assume so if you are undertaking a TTR strategy.

I would discuss with your adviser the implications of a recontribution strategy under your low rate cap if withdrawing the balance doesn't trigger a higher CSA calculation, If possible it may increase the tax free portion of your fund and as such increase the tax free % that you are withdrawing under your TTR, this may help.

Although debatable from a legal perspective as to application of this strategy is to renegotiate your employment contract to include a higher mandatory contribution. Instead of 9% you may be able to renegotiate your employer paying 15% mandatory SGC contributions as part of your total remuneration package. If a change of assessment is initated however it may be deemed that it was to reduce child support, however I would argue that as a 55 year old, the main purpose was to provide better retirement outcome and to reduce your reliance on the aged pension (otherwise proper). If successful it will result in the required superannuation contribution being made, but as it is being made as a mandatory contribution, it is not reportable like salary sacrificing. Again this may fail if ever scrutinized by the ATO.

Speak to your financial adviser as the above information is general and untested, your adviser should be able to contact the CSA with your approval in an attempt to remedy the situation. I do read your post with great interest and I will endevour to provide a more researched response. Unfortuantly the problem with the CSA is that once they have made a desicion, I believe you need to go via the COA avenue at which point they tend to ignore the CSA act definition of income and use a much more subjective and much wider means of determining any possible financial resource.
I do read

Apology to Macsmum


As a payer I had my blinkers on - you are quite right - this affects payers and payees.  I might add that I rang CSA and explained and the helpfull gentleman on the other end discussed it with his "Policy" advisor who said that was the way it was supposed to be assessed and that was that.  I have asked for a review of the assessment.
No apology required, was glad of the info. In my title I also meant to say applicable not only to payers.
Perhaps you could set up another salary sacrifice such as a novated lease on a car, which is not reportable to C$A, to offset the higher C$A assessment.
Sadly, as a Novated lease company, we are getting lots more calls of late, from clients running into issues with the CSA.

Mainly because CSA also does not understand the FBT - Employee contribution method (ECM).

What we have found, is that our clients are being told, as they have a novated lease, theyshould havea grossed up Fringe Benefit showing on theirgroup certificate.
And that the Group Cert is wrong and they need to go back to their employer, of course this is wrong as the FBT is paid post tax, thus not to shown.


Last edit: by MikeT

You are correct and C$A is wrong again.

However the only reason C$A will go to great lengths to increase the payers child support income is if they believe the payee is financially hard up and the kids need the $$$.

It's not an automatic recalculation. They must show that special circumstances exist before they can depart from the formula such as adding back other salary sacrifices than super contributions (excluding super guarantee), or business deductions such as depreciation.

Although the appeals process is not very friendly, every decision can be challenged and much patience is required to negotiate the process with success.

Do not accept what C$A tells you - remember C$A employees are ingrained with a collection mentality and bribed with a few hundred dollars each year in the form of a 0.5% pay bonus if they increase collection.

It might be better for Mikec not to take the pension just yet.
I'm also sure the CSA are aware of the novated lease arrangements.. I would imagine that they would employ accountants and I wouldn't be surprised if a decent percentage of CSA employees would have novated lease arrangements and know exactly how they work…

It's a shame in Mike's case that his income is being double counted. The sole purpose of a transition to retirement pension is to increase superannuation tax effectively and reduce the burden on the tax payer in the form of a lower aged pension benefit… A major point of change of assessments it to increase collection so that the tax payer doesn't pay more family tax benefit.. So the CSA is reducing the amount paid by taxpayers for FTB, but increasing the amount paid by taxpayers for the aged pension.. It's a pointless system that costs as much as it collects… It's hard to believe that in the bigger picture it's all administered by the one entity.. The single federal government… Make you wonder if the applicable ministers ever actually talk to each other!!!
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